Can You Be Sued If All Your Assets Are in a Trust?

Can you be sued if all your assets are in a trust? Yes. Putting property into a trust changes who holds legal title and how it passes. It does not automatically block a claim against you, the trustee, or the trust property. This page gives general information about trusts in Florida. Leslie V. Marenco is the responsible lawyer for this page. Trust Counsel, PL’s only office is in Coral Gables.

The short answer: a trust does not make you immune from being sued

No, a trust does not stop a lawsuit just because it exists. A trust is a way of holding and managing property, not a person. Claims usually target the trustee, the settlor (the person who created the trust), or property inside the trust. Which one applies depends on the claim.

People often mix up three different questions:

• Can a creditor of the settlor reach the trust property?
• Can a beneficiary or other person sue the trustee?
• Can someone challenge the trust itself?

Trusts in Florida are governed by state law, and how that law applies to a particular trust depends on the trust document and the facts of the situation. Trust Counsel, PL focuses on trust and estate litigation in Florida.

Why a revocable living trust usually does not shield assets from your creditors

A revocable trust generally does not protect its assets from your creditors while you are alive. Under Fla. Stat. § 736.0505, the property of a revocable trust is subject to the claims of the settlor’s creditors during the settlor’s lifetime, to the extent the property would not otherwise be exempt by law if owned directly by the settlor.

The reason is control. Unless the trust says it is irrevocable, the settlor may revoke or amend it under § 736.0602. Because the settlor keeps that power, the law treats those assets much like property the settlor owns personally.

Take a settlor who is sued over a personal debt. If the family home sits in a revocable trust, the creditor can reach it only to the extent the property would not otherwise be exempt by law under Fla. Stat. § 736.0505(1)(a), so a home that qualifies for Florida’s homestead exemption may still be protected. The trust label does not change that.

A revocable trust still has real uses, such as planning for incapacity or managing property after death. Those goals are separate from creditor protection.

Who can sue when a trust is involved

Under § 736.1001, a violation by a trustee of a duty owed to a beneficiary is a breach of trust.

The core duty is loyalty. Under § 736.0802, a trustee shall administer the trust solely in the interests of the beneficiaries, as between the trustee and the beneficiaries.

When a breach is shown, a court has several remedies. It can compel the trustee to redress the breach by paying money or restoring property, order an accounting, reduce or deny the trustee’s compensation, or remove the trustee. § 736.1001 lists these remedies, among others, and also allows the court to order any other appropriate relief.

Trust Counsel’s attorneys can serve individually as trustee or personal representative. The firm advises and represents trustees, personal representatives and beneficiaries. A personal representative (often called an executor) can face similar claims when handling an estate.

When an irrevocable trust may offer more protection, and its limits

Trusts are generally described as revocable or irrevocable. The settlor gives up the power to take the property back. Under § 736.0505, a creditor of an irrevocable trust’s settlor may reach the maximum amount that can be distributed to or for the settlor’s benefit.

Timing is the next limit. Fla. Stat. § 726.105 treats a transfer as fraudulent as to a creditor if the debtor made it with actual intent to hinder, delay, or defraud any creditor. Under Fla. Stat. § 726.105, in determining actual intent to hinder, delay, or defraud a creditor, consideration may be given, among other factors, to whether the transfer was to an insider, whether the debtor retained possession or control of the property after the transfer, and whether the debtor had been sued or threatened with suit before the transfer was made. § 726.106 covers transfers made without reasonably equivalent value to a creditor whose claim arose before the transfer, where the debtor was insolvent at that time or became insolvent as a result of the transfer or obligation.

Spendthrift clauses have limits too. § 736.0503 says a spendthrift provision cannot be enforced against certain claimants, such as a beneficiary’s child, spouse or former spouse holding a support judgment. Those claimants can get relief only as a last resort, after an initial showing that ordinary collection methods are insufficient.

Risks include losing control of the property, a court unwinding a transfer, and tax and cost effects that should be reviewed with counsel before funding.

Can someone sue a family trust?

Most claims fall into one of two groups. One challenges whether the trust is valid. The other says the trustee broke a duty after the trust took effect.

Validity challenges face short deadlines. § 736.0604 bars a contest of a trust that was revocable at the settlor’s death if it is not started within the earlier of the time under chapter 95 or six months after the trustee sent a copy of the trust and a notice.

Conduct claims have deadlines too. For matters adequately disclosed in a trust disclosure document, § 736.1008 bars a beneficiary’s claim unless a proceeding starts within 6 months after receipt of the document or a limitation notice, whichever is later.

Information rights matter early. § 736.0813 generally requires a trustee of an irrevocable trust to account to qualified beneficiaries at least annually, but a qualified beneficiary may waive that duty in writing, and a family trust company may account at other intervals as the statute allows.

Does a trustee have control over a trust? The trustee holds legal title and runs the administration. The trustee must still act under the trust terms and the duty of loyalty. Many of these disputes begin with a demand letter or an accounting request. Some are mediated, and the Florida ADR Resource Handbook covers court alternative dispute resolution rules and mediation confidentiality.

What decides whether a particular trust can be reached

Whether a particular trust can be reached depends on the facts. Five factors usually matter most.

First, is the trust revocable or irrevocable? While a trust is revocable, § 736.0603 says the trustee’s duties are owed exclusively to the settlor.

Second, when did the property move into the trust? Timing matters, and § 726.105 lists whether a suit was already filed or threatened.

Third, what was the settlor’s financial condition at the transfer? § 726.106 asks whether the debtor was insolvent at that time or became insolvent as a result.

Fourth, who is the trustee, and what did they do? These facts drive any breach claim under § 736.1001.

Fifth, what does the trust document say? Its terms, any spendthrift language, and any powers given to the trustee all shape the answer. When a claim arrives, the trust document, transfer records and timeline are usually the first items reviewed.

If a claim involving a trust has reached you or someone you care about

If a demand letter, lawsuit or family objection about a trust has reached you, you may be handling it while grieving or while relationships are strained. You may be a trustee who did not expect a claim, or a beneficiary waiting for answers. Start by asking which question applies: creditors, the trustee’s conduct, or the trust’s validity. The trust litigation overview explains how these disputes are handled. Related pages cover the cost of suing an estate, contesting a beneficiary and suing a trustee for breach.

If a demand letter or family dispute over a trust has already reached you, you don’t have to sort it out alone. Call (305) 707-7126 or schedule online for a free, confidential first consultation, with no obligation to continue.